From the course: Economic Tips for Everyone

The importance of housing for the economy

From the course: Economic Tips for Everyone

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The importance of housing for the economy

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- Housing is important. For most people, a home is their most valuable asset or it's the most valuable asset that they will own at some point in their lives. This is why housing is so important for wealth creation. But it's also really important for consumer confidence and financial markets. If people's largest asset has a high value, they'll feel wealthier, giving them confidence and the willingness to invest in riskier assets, like equity markets. For the business cycle and GDP, housing's important, because it almost always contributes to economic growth after recessions and in recoveries. This is because central banks lower interest rates during recessions and that helps support both home prices and home sales. Of course, the recession from 2007 to 2009 was an exception, because it was caused by housing and after that recession, housing credit was constricted. But that recession aside, housing usually contributes to economic recovery and growth.

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